Keppel braces for headwinds on back of $3b KepLand privatisation bid

It's hard to realise synergies in the near-term.

Analysts warn that Keppel’s audacious $3b privatisation bid for Keppel Land will bring short-term headwinds for the firm, but believe that move can unlock long-term value for one of Singapore’s biggest conglomerates.

According to Maybank Kim Eng, a soft property market would make it difficult for KepCorp to crystallise the benefits of a fully-controlled Keppel Land in the near term, although it has made privatisation cheaper.

“We do not think there would be positive value creation in the short term. Other than immediate accretion to EPS, NAV and ROE, synergies from three very different core businesses - Offshore & Marine, Property and Infrastructure - are not readily apparent. We believe that investors would not settle for the diversification argument,” stated Maybank Kim Eng.

However, the deal will create longer-term value in KepCorp’s improved ability to make attractive property investments with its greater autonomy and more efficient capital allocations.

“This could add value to its property division when the cycle turns. KepCorp hinted at such a vision though no concrete plans were communicated. We do not think this could be realised in the short term. We would watch for more developments,” the report noted.